nama explained in laymans terms

SeaFields

Perhaps somebody in the know could explain this to me....

Ive got the concept of NAMA and how it is to work I think.

However surely the concept of the good bank is cheaper and more likely to work?

If even half what it is estimated it will cost to set up NAMA is put into a good bank, free to lend to the small and medium business, then it will save the taxpayer a fortune and we wont be taking on the Bertie Bubble debt. Plenty of money going into the economy too. Fcuk the other banks like. We are a small country - we hardly need all of em - one good one will do.

Not looking for an argument here (as if I'd get one defending NAMA in this thread!) but am I right?

LostinBlanch

Seafield,

Sand has pretty much nailed it on the head in this post.

And yes, you are right, doing what you suggest is the way that any competent, rational and honest government would do things. But alas we're ruled by a government who has shown little if any of those qualities so far.

Front

SLUSK wrote: »

How the hell do you think nama can bring profit to the taxpayers? If the developers can't sell their stuff at a profit now, why should nama magically profit 3 years from now, or even 30 years from now? Just let the incompetent banks go bust and competent bankers perhaps from germany and other countries will by up their assets and we start all over. In Sweden failing banks were nationalized and sold to the highest bidder, why could this not work here? I can't even begin to tell you how morally obscene it is to bail out these bankers with taxpayers money. The whole FF leadership should be put under criminal charges for this. I guess you Irish accept corruption because that is the only thing you know. No wonder why this country sucks so much as, no wonder the best and the brightest always leave. Keep on voting FF you morons, see where it will lead ya!

If you don't like Ireland, theres an airport at the end of the M50 North.

ei.sdraob

Bertie is that you ? :rolleyes:

"they can go and hang themselves" he said before which is similar to what you posted @Front

so no if a citizen doesnt like seeing his taxes pissed away, he has to shut up and emigrate?

Sponge Bob

Front wrote: »

If you don't like Ireland, theres an airport at the end of the M50 North.

Hi Bertie.

Can you tell us why AIB is being bailed out by the taxpayer for the THIRD time in a generation seeing as you were involved in all three bailouts ??

Sand

We have lost him, he has gone to the dark side ....

Remember he who pays the piper calls the tune.

Interesting thing about Alan Ahearne is that Karl Whelan was seemingly a bit stung about Ahearne making dismissive remarks about the 46 economists living in ivory towers. So he has dug up an article penned by Ahearne on NAMA back before Ahearne was taking Fianna Fails coin (July 2008, he joined up with the boys in March 2009) and put it on irisheconomy.ie

A key question would be what price the agency should pay the banks for the loans? Buying the assets at inflated prices would amount to a back-door recapitalisation of the banks. Similarly, many of the proposals currently doing the rounds to reignite the housing market using government subsidies to first-time buyers involve disguised bail outs of banks and developers.

Best practice is for the banks to recognise the losses on these loans up front and sell the assets at fair market value. If banks do not have sufficient capital to take the hit, then they should raise new capital to plug the hole. Dealing with impaired assets properly will be critical for our economic recovery.

This frankness (and his undeniable expertise) is why his appointment was welcomed at the time. Hence his response to the 46 economists concern over NAMA (based on a similar logic to his own - a disguised bail out, the market value not being recognised, banks not recognising the real loss) indicates that he has "gone native" during his time at Fianna Fail HQ. So hes gone from being outside the tent pissing in, to being inside the tent pissing out. This is why Fianna Fail have run the country practically uninterrupted for decades.

However surely the concept of the good bank is cheaper and more likely to work?

It gets to the root of the matter - supporting the economy by making credit available to support investment and economic activity. Thats what we want. Credit underpins economic activity.

NAMA gets confused and adds an extra layer of surplus complexity, diverting into saving Bank of Ireland and AIB shareholders and bond holders at *any* cost. Even I was surprised by the comments coming from the Department of Fianance bunker...they are literally saying that they will save Bank of Ireland and AIB at *any* cost, write *any* cheques. They have completely lost perspective on this issue. I can be persuaded BoI or AIB are important - but are they truly worth *any* cheque?

I mean christ, apparently some FF TD was on the radio yesterday saying *Ireland* was already seeing the benefits of NAMA in that BoI and AIB bank shares were risining?!?!?! How confused is there thinking when they confuse the citizens of the state with Bank shareholders...

Department of Fianance thinking can be summarised as follows:

1 - Destroy Irish economy to save Bank balance sheets
2 - ???
3 - Profit!

It is very much worth noting that the decline in Irish property prices could be far worse than anyone imagines: The Irish Times property section ( a standard bearer of "the industry") has been reduced to reporting that for 1 million euro you can buy an 18th Century mansion (which was to be developed into a hotel) AND 14 houses built on the property which were to be sold for 412,000 to 545,000 euro EACH. Figure 7 million euro for the 14 houses. Add onto that the price of the 18th century mansion: What would that change hands for in the boom years? Now everything is beind sold for 1 million. Figured from 7 million ( free mansion) then its only worth 14% of what market prices used to be. 86% decline.

Sand

Its all getting a bit tense in the Fianna Fail bunker:

http://www.youtube.com/watch?v=9yjvCpHciYQ

SeaFields

How much money would a good bank need to stimulate the economy?

I know that is probably asking how long is a piece of string. I mean NAMA has seen figures up to €90billion to buy all the bad debts and I heard Enda Kenny saying their alternative good bank would cost €25billion. Thats a massive difference. I checked their website but the details on the alternative are poor - just a couple of pages.

I still cant get my head around the buying of up to €90 billion of privately accumulated debt to save privately owned businesses (the bank and developers) when a good bank given alot less money could freely lend into the economy. WHAT THE FCUK LIKE! Doesn't seem like bloody rocket science to me.

ei.sdraob

SeaFields wrote: »

How much money would a good bank need to stimulate the economy?

I know that is probably asking how long is a piece of string. I mean NAMA has seen figures up to €90billion to buy all the bad debts and I heard Enda Kenny saying their alternative good bank would cost €25billion. Thats a massive difference. I checked their website but the details on the alternative are poor - just a couple of pages.

I still cant get my head around the buying of up to €90 billion of privately accumulated debt to save privately owned businesses (the bank and developers) when a good bank given alot less money could freely lend into the economy. WHAT THE FCUK LIKE! Doesn't seem like bloody rocket science to me.

i dunno just thinking out loud here


if such a "good bank" can go and borrow money from ECB at the base rate (which is crazy 1% at time of writing) and then turn around and lend it at 2% (keep the difference as profit to cover operational costs)

they can go ahead and lend at this crazy rate

i dunno im no economist so i could be missing something



from what I gather the central banks are keeping rates at insane low levels, but the banks are not passing on the low rates to businesses and customers, instead hoarding cash

so i suppose if you cut all the crap...


i dont know im no economist if theres flaws in my reasoning please point it out

SeaFields

Yeah and just going by interest rates...perhaps struggling or small businesses could be charged even less interest.

They could put in place measures such as interest rate reductions on overdrafts and the like if you hired extra staff or met certain export targets?

I'm also thinking out loud and not an economist!

LostinBlanch

Well getting back to the nub of the question - here it is in Mr Men terms.

Volthar

My main concerns about NAMA are:

1. Once banks will get rid of so called "bad loans" what will stop them from replacing these with new "bad loans"? I am not talking about giving a mortgage to some poor sod who may loose his job next year. I am talking about big money that go to crooks namely "property tycoons"

2. NAMA wil buy bad loans for 60-70% of their value but properties are going down and probably selling these properties will not even cover this 60%. OK i can imagine property being sold by NAMA on some sort of auction... now is there any risk that NAMA management will help his fellow "Tycoon" acquire cheapo property at 30% of it's value as the remaining 30% will be covered by te taxpayer? Then they will just say: "well... the NAMA experiment did not work..."

3. Sill not clear to me how it is going to work. Let's say one poor sod can not pay his mortgage. As it happened NAMA (meaning govt, taxpayer, us) buys his loan at 60% of it's value. What happens next? Is his property going to be sold and himself left homeless? I have no problem with it but this should be done by his bank not NAMA (as nama is at the end of the day all of us).

Maybe I am negative but somehow I have bad feeling about this idea... sounds like another attempt to keep property value at high, unrealistic level...

Volthar

Purple Gorilla wrote: »

I don't agree with the "It's a baliout for Developers" argument. They still owe the money. How is that a bailout? If they don't pay up, they lose their developments and that becomes the State's land. The banks aren't exactly getting off easy either..they'll be taking a significant hit by this.

but maybe they do not want these developments anymore?

Volthar

SLUSK wrote: »

NAMA as I understand it will give the developers years to sell of their assets, under normal market conditions they would have gone bust. If you can't see that FF are bailing out their buddies in the banks and their developer buddies you are blind. This country is a banana republic.

AMEN to this

Volthar

lucky-colm wrote: »

i don't think so,
but lets take your option and leave the banks go bust
what happens then?
[...]

Then someone else will fill the gap. Market does not like vacuum and I believe some big banking players are already looking at Ireland... People need credit and there is someone out there who is waiting to give it to them.